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Silver HNI - Commodities Info


General Characteristics

  • Silver's unique properties make it a very useful 'Industrial Commodity', despite it being classed as a precious metal.
  • Demand for silver is built on three main pillars; industrial uses, photography and Jewellery & silverware accounting for 342, 205 and 259 million ounces respectively in 2002.
  • Just over half of mined silver comes from Mexico, Peru and United States, respectively, the first, second and fourth largest producing countries. The third largest is Australia.
  • Primary mines produce about 27 percent of world silver, while around 73 percent comes as a by-product of gold, copper, lead, and zinc mining.
  • The price of silver is not only a function of its primary output but more a function of the price of other metals also, as world mine production is more a function of the prices of other metals.
  • The tie between silver and economic activity is strong, given that around two-thirds of total silver fabrication is in the industrial and photographic sectors.
  • Often a faster growth in demand against supply leads to drop in stocks with government and investors.
  • Economically viable primary silver mine is a function of the world silver price level.

World Silver Supply from Above-ground Stocks

in Million Ounces20012002
Implied Net Disinvestment-9.520.9
Producer Hedging18.9-24.8
Net Government Sales87.271.3
Sub-total Bullion96.667.4
Scrap182.7184.9
Total279.3252.3

Indian Scenario

  • Silver imports into India for domestic consumption in 2002 was 3,400 tons down 25 % from record 4,540 tons in 2001.
  • Open General License (OGL) imports are the only significant source of supply to the Indian market.
  • Non-duty paid silver for the export sector rose sharply in 2002, up by close to 200% year-on-year to 150 tons.
  • Around 50% of India's silver requirements last year were met through imports of Chinese silver and other important sources of supply being UK, CIS, Australia and Dubai.
  • Indian industrial demand in 2002 is estimated at 1375 tons down by 13 % from 1,579 tons in 2001. In spite of this fall, India is still one of the largest users of silver in the world, ranking alongside Industrial giants like Japan and the United States.
  • By contrast with United States and Japan, Indian industrial offtake for fabrication in hardcore industrial applications like electronics and brazing alloys accounts for only 15 % and the rest being for foils for use in the decorative covering of food, plating of Jewellery and silverware and jari.
  • In India silver price volatility is also an important determinant of silver demand as it is for gold.

India Industrial Fabrication, 2002

in Percentage
Pharmacy & Chemicals22.4
Foil9
Plating13.7
Solders & Brazing5.4
Electrical13.5
Photography0.85
Jari17.1

World Markets

  • London Bullion Market is the global hub of OTC (Over-The-Counter) trading in silver.
  • Comex futures in New York is where most fund activity is focused

Frequency Distribution of Silver London Fixing Volatility from 1995 till date

Percentage Change Daily > 7%5-7%3-5% < 3%
Number of times710852086
Percentage times0.30.53.995.3
Weekly
Number of times91550363
Percentage times213.411.483.1

Biggest Price Movement since 1995

Between February 4 - 6, 1998, daily prices rocketed by 22.3%, as on a noted US financier had accumulated nearly 130 ounces of physical silver.
Note : Post September 1999 daily silver prices have not shown more than 5% movement once and weekly silver prices only once.


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